Economic Encounters of the Plural Kind

Archive for November, 2009

It’s official, as a follow up to a previous post, and the buyout on the six remaining years of Weis’ contract could be as much as $18 million. Failure seems to be a popular way to make loads of money these days.

Not everyone is buying into “black Friday” these days. In Oakland, there has been an effort to encourage shoppers to think about an alternative type of shopping. They could show support by wearing plaid while doing their shopping.

A more extreme alternative has been promoted by Adbusters, Buy Nothing Day, where people can protest consumerism by buying nothing on the day after Thanksgiving. Certainly for some people, freedom to not choose is more important than being free to choose.

Following up on my last post about carbon commodification, I’ve read that Naomi Klein (author of No Logo) is going to take on the free market approach to climate change in her next book:

The Toronto-based journalist and activist says advocates for market-based solutions like carbon trading will face-off against those who believe a longstanding “climate debt” obliges rich countries – which produce most pollution – to fund sustainable environmental futures for poorer countries, which suffer the most ecological damage.”It is absolutely going to be a war in Copenhagen,” Klein says in a recent interview…

“You have this generation of young people whose views of the market and the economy have been profoundly shaped by this meltdown and by witnessing massive inequality and even witnessing this so-called recovery,” says Klein, who speaks regularly at university campuses…

“I’m very excited by the idea of climate debt…. This accounting could lead to serious funding for countries to leapfrog over fossil fuels. It isn’t just a punitive measure, it has all kinds of possibilities that benefit everybody.”

With all of the talk about the future of the ND football program and coach around campus and in the New York Times (here and here), I thought it might be time to take another look at the economics of the program.

A recent Scholastic article by Marques Camp looked at “The big business of college sports and the players who play them.” According to the article, the football program alone brought in $59.8 million in revenue and $23.3 million in profits from a combination of merchandising and apparel licensing, ticket sales, and its NBC television contract (which was just renewed to pay up to $9 million per year for exclusive rights to broadcast the homes games).

Camp asks the obvious and important question:

Given the amount of revenue that the Notre Dame and many other well-known athletic programs generate, many student-athletes and other critics wonder where the student-athletes fair share of the profits is. NCAA bylaws prohibit the payment and commercial use of student-athletes, else they compromise their amateur status and, consequently, their collegiate eligibility.

The article discusses the complexity of the situation and the vast differences in viewpoints. One member of the football team calls it “essentially modern-day slavery.” ND finance professor Richard Sheehan points out that allowing the market to dictate athletes wages “would have a minimal impact on most athletes and send most football programs even deeper into the red.”

Whatever the ‘fair share’ of profits might be, one thing is certain: the players have no say. Nor do they have any say in the new coach, even as the most directly affected actors. As explained by Athletic Director Jack Swarbrick, “Every meaningful decision that involves athletics involves two people, it’s Father John and I.” And the fans are largely left out too, which is too bad because we do have plenty on our minds about NBC’s generous use of commercial breaks.

A friend who works in energy consulting (specifically focusing on carbon offsets) has sent me a thought-provoking and troubling paper on cap-and-trade legislation and the weaknesses of the carbon market/offset system it creates. Larry Lohmann, the offer of the paper, casts a political economy lens on this system and critiques it in light of the lessons the economic crisis has taught (some of) us- the paper is long, but you can get the gist from the 2 or 3 bolded sentences on the margin of each page.

The main critique of the cap and trade system is that it engenders creation of

The abstraction is typical of neoclassical economics, which as we’ve discussed in critiques of GDP, seeks to quantify everything in money so that it can create commodities. The paper cites Polanyi a number of times, who was the foremost political economist that spoke against creation of fictitious commodities. The problem with the commodified carbon (as with MBS et al.) is that quantification likely obscures more than it reveals.

Market architects abstract from the question of how those reductions are made. This distances carbon markets from the climate problem in the same way that historical labour markets, in inventing abstract labour, disconnected from and modified the significance of various concrete useful human activities of livelihood.

These markets and the false equivalencies they entail ignore the reality that

it matters not only how much emissions are cut but also how they are cut…cap and trade is designed to treat emissions-reduction measures as equal, regardless of whether they are likely to contribute to unquantifiable but important positive global synergisms.

What are the consequences of going forward with such a system?

First, the fact that there can be no firm basis for offset accounting opens the way for unresolvable conflicts over estimates of carbon credits…

A second consequence of offsets’ reliance on an unworkable, self-invalidating
calculation methodology is that it undermines the possibility of effective regulation…

A third effect of an untenable quantist methodology is that it stores up an asset valuation problem similar to that of sub-prime mortgage-based securities before the 2007-08 financial crash.

Lohmann charcacterizes the emphasis on quantification and markets as part of a neoliberal ideology extending into the realm of climate change mitigation. He notes that this new conventional wisdom appears to have won out, as

This message is difficult to stomach. I am naturally inclined to solutions that seek to quantify everything, because I tend to value simplicity and elegance. I’m beginning to realize, however, that most of the time complexity trumps simplicity, and that economics seems to favor simplicity to a fault.

I also have a hard time reading this paper without thinking that Waxman-Markey might actually be detrimental in the long run, but entrenching far from good enough policies. Perhaps the recently invograted 350 ppm movement can allay some of these concerns by making the caps aggresive enough to force real, long-term change, regardless of what market participants want. I’m not optimistic that it can succeed in raising (lowering) the bar, though, because it seems even a weak bill like W-M will have a hard time passing the Senate.

I suppressed my urge to use scare quotes in the title of this post, but could not suppress the urge to at least note that scare quotes are applicable. Why?

Even before the recession, more than one in five Americans could not afford to pay for basic needs without help from family, friends or outsiders, according to a survey by the Census Bureau.

Fourteen percent of all Americans and 26 percent of blacks who responded to the 2005 survey reported that at sometime in the preceding year they were not able to meet essential expenses, like paying bills for basic needs, avoiding foreclosure and buying sufficient food.

There may be a tendency to look at U3 and say, well, at least 90% are doing OK; or to look at U6 (if you’re more worldly, I suppose), and say that at least 82% are doing okay. The reality is that things have been very bad for a significant amount of Americans even during “boom” times (couldn’t resist). I wonder what that one-in-five number would be if the survey were taken today.

At Economix, Nancy Folbre writes about an agreement between the United Steelworkers and Spain’s Mondragon Cooperative to begin manufacturing cooperatives in the US and Canada.

The United Steelworkers is the largest industrial union in the United States, with 1.2 million workers. Its ranks have been devastated by the decline in domestic steel production, and it now represents workers in a variety of industries, including health and education.

With almost 100,000 workers, the Mondragon Cooperative Corporation (M.C.C.) is the seventh largest business group in Spain and the world’s largest workers’ cooperative. Its diverse enterprises, including manufacturing firms, a university, retail shops and financial institutions, are not only worker-owned; they are also democratically managed on the principle of one worker, one vote.

Unions have long been suspicious of worker-ownership proposals intended to co-opt organizing campaigns or as last-ditch efforts to rescue failing companies. But unions also have a long history of collaboration with worker co-ops, based on a broad set of shared values — commitments to democracy and solidarity.

And worker ownership represents an alternative to ineffectual collective bargaining…

The proposed Mondragon collaboration grew out of a United Steelworkers partnership with a Spanish wind turbine firm, Gamesa, to refit steel plants in Pennsylvania for wind-turbine manufacture. Mondragon could provide the organizational expertise and help raise the venture capital necessary to expand such initiatives…

This news is very encouraging. If the green jobs movement can be channelled through these cooperatives, it would really be an excellent stepping stone for a different type of economy. Mondragon is a great model for worker-controlled distribution of surplus value.

My only concern is whether the model will be culturally adaptable to fit the mores of blue collar America. Workplace democracy is something very few American workers are used to- we can’t pretend that unions truly offer it. I imagine that when workers see the benefits, they will embrace the model, but I hope some attention is paid to this issue.

Open Economics

This blog is administered by a group of students and alumni from the University of Notre Dame who are interested in engaging and debating the world of economic phenomena we face, everywhere and everyday.
Disclaimer: Opinions expressed herein are the authors' own and not those of any organizations or employers to which they are attached.